A Review of the Nigerian Energy Industry

Chevron executive wants shale proceeds shared with communities

Chevron_Logo29 May 2013, News Wires – A senior Chevron executive wants Europe to copy the United States by sharing any profits from exploitation of shale gas with local communities.

This is already happening in the US, where landowners benefit directly from shale gas finds, Derek Magness, Chevron’s general manager for Europe, Asia and Middle East, told Reuters.

He also advocated an EU-wide framework if Europe is to tap into its shale gas reserves quickly enough to reap the benefit.

Debate is intense in Europe about whether shale gas, by lowering energy costs, can provide the kind of economic boost that it has delivered in the United States.

“There’s a big unknown here,” Magness said according to the news wire, adding that Chevron was committed to exploring shale gas reserves.

The amount of available data for Europe is tiny compared with the United States.

In Poland, for instance, only one well has been drilled in one concession, while for some areas of similar size in the United States, there might be 4600 wells, Magness said.

So far, he said, Chevron was drilling a fourth well in Poland and hoped to drill two more this year. It also plans to explore in Romania and is in talks with the Ukraine government.

Magness said he could not comment on ongoing negotiations.

While Chevron says it is staying, other companies, including ExxonMobil, have abandoned shale gas operations in Poland. Some have cited uncertainty about the regulatory environment, as well as poor drilling results.

The European Union’s Executive Commission has said there is sufficient EU-wide regulation in place for the exploration phase of shale gas, though more might be needed to cover development. It has said it will publish later this year a non-binding framework to guide activity.

“We need that regulatory environment in place,” Magness said, arguing it could overcome confusion and share best practice, with nations such as Britain providing a possible model.

British Prime Minister David Cameron, whose government is advancing plans for its shale gas deposits, said at an EU summit on energy last week that Europe could not afford to be left behind as the United States gains a competitive advantage.

Magness said the question is “whether (the European Union) can do it in a timely manner in order to take advantage of the marketplace”.

Benefits for the United States have included encouraging re-industrialisation, as the chemical industry, for instance, is drawn by cheap energy.

But for Europe the situation is complex. Opposition from environmental campaigners is strong and geology and geography are very different.

Analysts say the cost will rise as prices fell so far in the United States that shale gas developers suffered a loss.

One catalyst in the United States has been the direct financial benefit to landowners, which has overcome resistance, whereas in Europe resources tend to belong to the state.

Magness said he had discussed with governments the idea of handing some of the profits to communities.

“We would very much encourage the government to ensure a portion of the profit would go to that community,” he said. “At least return it to the community in the form of a larger piece of the budget.”

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